Concerns of a stock market crash are swirling ahead of Friday’s crucial jobs report. Indeed, tomorrow’s labor report should confirm whether or not the country is truly on pace for the Federal Reserve’s oft-mentioned soft landing. It should also offer some insight into what to expect in the new year.
So, what do you need to know this time around?
Well, the final jobs report for 2023 is due Friday morning, with economists predicting that the U.S. economy added 160,000 non-farm payrolls in December. This would put the country on pace for an average of 232,000 jobs per month through November, marking 2.78 million jobs for the year.
This is actually notably below the 4.79 million jobs added in 2022 — one of the strongest years for jobs since the metric was first recorded. Indeed, unemployment eased to 3.4% in January of last year, the lowest level since 1969 according to CNN.
While the unemployment rate has since risen in the months following, it has remained surprisingly strong, especially given once-widespread predictions of a recession on the way. If you recall, the unemployment rate came in at 3.7% in November on 199,000 added jobs.
That’s despite the hundreds of thousands of workers who went on strike last year.
Stock Market Crash Fears in Full Bloom as Strong Jobs Push Back Rate Cuts
Interestingly, Wall Street may be disappointed by just how strong jobs come out on Friday. Indeed, if the labor market comes out too tight for December, it will likely tilt the Fed towards delaying its rate cuts this year. That would be a negative for the stock market.
Unfortunately, it looks increasingly likely that jobs will come out strong on Friday. Today, ADP released private payrolls data showing jobs increased 164,000 in December, a huge jump from November’s 101,000 level and better than projections for 125,000.
“We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” said Nela Richardson, Chief Economist at ADP.
This has set the stage for a potential jobs beat on Friday. Indeed, economists predict the jobless rate will come out at 3.8% in December. While this may further undercut any recession predictions, it would probably end some speculation that the central bank could cut rates as early as March.
“When it comes to trying to settle the argument about whether or not the economy is on the path toward recession in the coming year, there couldn’t be more important economic news on the planet other than the payroll jobs report,” FwdBonds Economist Christopher Rupkey told CNN last week. “We haven’t had a recession without job losses, so we’re going to be tuning in to see whether or not the labor market has lost any momentum.”
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
